International Monetary Issues and Agricultural Development

The value of a nation's currency is the most important price in its economy. Attempts to establish or maintain fixed exchange rates between countries are no longer possible due to the sheer size of international financial markets. The value of a nation's currency not only influences the relative prices between its tradeable and nontradeable sectors, it influences in very important ways a country relates to the rest of the international economy. The most significant effect of cyclical swings in exchange rates is the impact on trade where undervalued currencies amount to an export subsidy and an import tariff.
U.S. foreign aid programs tend to strengthen the recipient country's foreign currency but hurt its development efforts. Needed stability in exchange rates can be achieved if countries pursue neutral monetary and fiscal policies